Stainless steel is likely to become cheaper by up to 2% or Rs 2,000 – 2,500 a tonne effective April 1 following the government’s decision to abolish import duty on the key raw material – nickel.

The Finance Minister Arun Jaitley in the Union Budget on Wednesday proposed abolishing import duty of 2.5% on nickel, which would make the cost of stainless steel production cheaper in India. Stainless steel industry uses nickel up to 8% for manufacturing industrial and utensil grade materials depending upon its quality and grade. Thus, the cost of stainless steel production in India varies depending upon nickel price and its quantum of use.

India is fully reliant on import from Indonesia and China among others for import of nickel either in pure ingot or scrap form to meet its requirement. Nickel, the silvery white metal, provides strength to stainless steel. Hence, the base metal has no substitute. India imports nickel in pure cathode form and ferro nickel in alloy form to an estimated quantity of 30,000 – 35,000 tonnes. Also, nickel is recovered through melting of stainless steel scrap in equal quantity for its secondary applications.

“We had requested the finance minister to abolish import duty on all types of nickel import. Since India does not produce nickel, our entire demand is met through import. Hence, levying a duty would certainly defeat the purpose of our objective. But, the finance minister abolished import duty only on nickel cathode. This means ferro nickel and stainless steel would continue to attract import duty. Through this, the government has resolved only half the problems of India’s stainless steel industry. Nevertheless, the cost of stainless steel manufacturing would decline for primary users of nickel which certainly be passed on to consumers. In actual terms, the user industry would benefit by Rs 2,000-2,500 per tonne for raw material procurement," said N C Mathur, President, Indian Stainless Steel Development Association (ISSDA).

India produces around 3.5 million tonnes of various grades of stainless steel annually for both industrial and household consumption. Buyers are very conscious today. International prices are well documented on daily basis. So buyers are aware of the variations in the domestic as well as international prices. Thus, any price variations in local markets would be well passed on to consumers immediately, said Mathur.

Meanwhile, downstream user industry is more wary of the quality control order than the import duty cut on nickel. Stainless steel utensil manufacturers believe that primary domestic stainless steel manufacturers have raised their basic prices by Rs 30 a kg over the last three months with its benchmark grade of stainless steel is quoted at Rs 1,36,500 a tonne now from Rs 1,03,500 in mid-October.

“The domestic primary stainless manufacturers are immensely benefited by the quality control order. From the time the order was implemented, stainless steel import into India has virtually stopped resulting in utensil manufacturers’ reliance on domestic suppliers. Since the specified quality of stainless steel required for manufacturing utensils on importers’ orders is not available from domestic sources, it should be imported at an affordable price. Thus, the government must withdraw the quality control order," said Anil Agrawal, Vice President, All India Stainless Steel Manufacturers’ Association.

 

Source:smartinvestor.business-standard.com

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